Financing SMEs and Entrepreneurs 2026: Ukraine
Table of contents
Despite the devastating impact of the large-scale Russian aggression, the Ukrainian economy continues to demonstrate resilience. The war has led to a range of interconnected problems and challenges faced by businesses, including the destruction of energy, transport, and other critical infrastructure, as well as the production facilities of certain enterprises; the continuous outflow of population from the country, which further destabilises the labour market and restrains domestic demand; logistical difficulties; and other issues. Taken together, these factors significantly complicate business planning and suppress economic activity.
Nevertheless, thanks to a high level of adaptability to challenging conditions and systematic financial support from international partners, the Ukrainian economy continued to recover in 2024, albeit at a slower pace than in 2023. In 2024, GDP grew by 2.9%, compared to 5.5% in 2023.
The lack of sufficient capital continues to be one of the main challenges constraining business development. This is compounded by a relatively weak domestic market and limited opportunities to expand exports. At the same time, lending is becoming an increasingly important source of business financing.
Steady growth in bank lending to SMEs was observed throughout 2024. Currently, business demand for hryvnia-denominated loans is at its highest level since 2021. This trend is supported by improved lending conditions, particularly lower interest rates. The quality of the loan portfolio has also improved, with the share of non-performing loans showing a declining trend.
The revival of bank corporate lending has significantly reduced the need for state-subsidised loans. Nevertheless, the Government continues to implement the preferential business lending programme “5-7-9%,” launched in 2020. Currently, lending under this programme is carried out in the following priority areas: financing business entities in critical sectors of the economy, particularly manufacturing and agricultural production; reconstruction of fixed assets destroyed as a result of military aggression; support for businesses operating in areas where hostilities are or were taking place; financing of enterprises engaged in energy services and the construction and installation of energy generation facilities, among others. The practical implementation of the state financial support programme is carried out through the integration of its priority conditions into banks’ own lending products.
Source: See Table 2.
The post-pandemic recovery was disrupted by Russia’s large-scale aggression in Ukraine. Significant labour and financial resources have been redirected towards the war effort, while major industrial centres and agricultural lands have been occupied. Between February 24, 2022, and July 2025, the Office of the United Nations High Commissioner for Human Rights recorded 49,431 civilian casualties in Ukraine: 13,883 killed and 35,548 injured. The actual scale of harm inflicted on the civilian population, both in terms of casualties and infrastructure damage, is likely considerably higher, as many reports of such harm, particularly from the early stages of the invasion, cannot be verified due to the volume of reports and the lack of access to affected areas.
In addition, about one-third of the population has been displaced, either internally or abroad. According to the UN, around 7 million people, mostly women and children, have left the country. According to the World Bank’s Rapid Damage and Needs Assessment (RDNA4), as of December 31, 2024, the physical damage inflicted on buildings and infrastructure by the war amounted to USD 176.1 billion.
Production capacity has been further impaired by additional disruptions in supply chains, the blockade of seaports, and a large-scale electricity shortage. As a result, in 2022, the first year of Russia’s large-scale aggression, GDP contracted by 28.8%.
In 2023, thanks to the economy’s high adaptability and international financial support, the recovery was quite dynamic, GDP growth already reached 5.5%. In 2024, these factors continued to play a role; however, the pace of recovery slowed, and GDP grew by 2.9%. According to preliminary estimates by the Ministry of Economy, over the first seven months of 2025 GDP grew by 0.9% (according to the State Statistics Service’s operational estimate, real GDP in Q1 2025 increased by 0.9% compared to Q1 2024). Among the most affected sectors is industry, reflecting the high concentration of heavy industry in combat zones, as well as agriculture. Less affected sectors include services, particularly the IT sector, which is largely located outside conflict areas and has been able to adapt relatively easily to wartime conditions due to growing demand for digital solutions, including from the state. Output in the construction sector is supported by the completion of unfinished projects and reconstruction efforts. In addition, activity in the defence industry continues to expand, while consumer-oriented sectors, such as retail trade, maintain operations thanks to the gradual recovery of consumer demand. These trends are reflected in strengthening business confidence and are reinforced by a stable energy situation and government support programmes.
Exports have benefited from greater trade openness with the European Union and the resumption of agricultural exports through seaports. The improvement in the economic situation has also encouraged more refugees to return. Nevertheless, private consumption remains subdued due to declining employment and relatively high inflation (the current level of inflation reflects the destructive consequences of hostilities on Ukrainian territory, which significantly reduces the effectiveness of traditional monetary tools to curb it, since the main drivers of domestic inflation are not only economic but also exceptional, war-induced factors).
2024 saw mounting inflationary pressures, with consumer inflation reaching 12% year-on-year. The main drivers of inflation were high production costs (rising prices for electricity, logistics, and raw materials, along with growing labour costs) and supply constraints (a poor harvest in 2024 due to drought, combined with growing export volumes, reduced the domestic supply of certain agricultural products). Inflation peaked in May 2025, accelerating to 15.9% year-on-year, but has since begun to ease, standing at 14.1% in July 2025. Overall, this downward price trend is expected to continue thanks to the gradual “exhaustion” of excessive cost pressures, along with prudent monetary and fiscal policies.
Public finances remain under severe strain. Since all domestic revenues are fully allocated to defence spending, civil government expenditures remain critically dependent on external financial assistance.
In such extraordinarily difficult conditions, the Government and the National Bank must constantly balance the need to stimulate economic growth, finance the budget deficit, curb inflation, ensure currency stability, and build up reserves.
SMEs play an exceptional role in Ukraine’s economic recovery. As of early 2024, SMEs accounted for 99.97% of all registered business entities and provided about 82.2% of jobs created in the business sector. In 2023, SMEs generated 70.5% of the country’s GDP. Although this figure is slightly lower than in 2022 (72.4%), it is higher than before the full-scale invasion (66.1%), which demonstrates the high resilience of SMEs during wartime and their ability to adapt to difficult external circumstances.
Taking into account the need to support and develop SMEs, the Government has approved the Strategy for the Recovery, Sustainable Development, and Digital Transformation of Small and Medium-Sized Enterprises until 2027. Its goal is to improve state policy in the field of SME development and support as a key sector of the national economy under the conditions of the full-scale armed aggression of the Russian Federation against Ukraine.
In 2024, lending to small and medium-sized enterprises (SMEs) became one of the most dynamic segments of Ukraine’s financial market. Following a moderate recovery in 2023, the banking sector shifted to an active expansion of corporate lending, with SMEs remaining a key driver of this process. The volume of net hryvnia-denominated business loans increased by more than 20 per cent in 2024, while demand for financing reached its highest level since the end of 2021.
At the same time, the financial condition of SMEs attracting debt capital improved significantly. A substantial share of corporate borrowers demonstrated strong solvency, their debt burden remained at a sustainable level, and default rates returned to the levels observed in 2021.
As a result, businesses gained improved access to working capital, their dependence on state financial support programmes declined, and recovery and modernisation projects intensified, including increased SME investment in energy resilience and energy self-sufficiency.
At the same time, state and international credit guarantee schemes continue to play an important role. By partially covering banks’ credit risks, these instruments enable lending to a broader range of enterprises. According to estimates by the National Bank of Ukraine (NBU), approximately one quarter of performing hryvnia-denominated business loans are already covered by portfolio guarantees.
In addition, Ukraine’s international reserves reached a record-high level of USD 43.8 billion at the end of 2024. This is expected to contribute to exchange rate stability, a reduction in macroeconomic risks, and further growth in business lending.
According to all key financial indicators, the availability of financial resources for businesses in 2024 was better than in 2023. Lending conditions for SMEs also improved substantially during the year.
This improvement was driven by the gradual decline in market lending rates following the easing of the NBU’s monetary policy, the strengthening financial position of SME borrowers, lower credit risks, the high liquidity of the banking sector, and increased competition among banks.
An important factor supporting the further improvement of lending conditions is the high level of banking sector liquidity, which indicates the availability of sufficient resources to finance businesses. At the same time, banks’ funding base continues to expand owing to growth in deposits. In 2024, hryvnia-denominated corporate deposits increased by 19 per cent, household deposits grew by 12 per cent, and the total volume of hryvnia deposits reached UAH 1.9 trillion.
Nevertheless, the ongoing war remains the principal factor constraining further improvements in lending conditions. Russia’s continuing full-scale invasion increases risks for both banks and businesses and limits the scope for credit expansion. Given the persistently elevated wartime risks, the prerequisites for a full return to pre-war lending conditions are not yet in place.
In 2024, within the framework of the “Affordable Loans 5-7-9%” programme, more than 25,000 contracts were signed for a total amount of UAH 94.7 billion, of which the largest volumes were issued for: working capital replenishment, UAH 23 billion; manufacturing enterprises, UAH 23.7 billion; loans in areas of military risk – UAH 21.9 billion; investment loans, UAH 20 billion. Thus, although the share of loans provided under the “5-7-9%” preferential business lending programme in the total credit portfolio somewhat decreased in 2024, the programme nevertheless remains an effective instrument of state financial support for business entities.
The implementation of the state grant programme for non-repayable financial support to businesses, “eRobota,” also continues. This government programme consists of several components, differing in their objectives and grant conditions. In addition to addressing business financing challenges, the programme contributes to other goals, including job creation, increased contributions to the social insurance fund, boosting business activity in regions close to the frontline, and supporting population groups requiring inclusion (such as youth and women’s entrepreneurship). For example, the most prominent component of the “eRobota” project is the “Vlasna sprava” grant programme, under which, since 2022, 29 000 entrepreneurs have received micro-grants totalling more than UAH 7 billion. According to the Ministry of Economy, this has enabled the creation of over 52 000 jobs and generated approximately UAH 9 billion in additional tax revenues and contributions to the social insurance fund.t
At the same time, the Government continues to develop this programme, improving both the grant allocation mechanism (e.g., expanding the network of partner banks through which state grants are provided) and focusing on the needs of specific categories of entrepreneurs (such as separate grant conditions for youth or creative industry entrepreneurs), as well as achieving social and other important objectives (e.g., grants for establishing and developing private kindergartens). Thus, although the budget of this state programme remains modest relative to the scale of the national economy, given its effectiveness, the Government plans to further increase the volume of grants provided to businesses.
Another important component of the “eRobota” programme is the provision of grants for the establishment or development of processing enterprises in specific priority industrial sectors. This programme aims to shift the national economy away from a raw material orientation towards increasing the production of finished goods with higher added value. Grants can be provided for the acquisition of both fixed production assets and intangible assets, as well as for applied research and scientific-technical (experimental) developments, thereby enhancing the innovative component of the economy. Since the launch of this programme component in 2022, more than 1 000 grants totalling about UAH 5.3 billion have been provided to manufacturing enterprises.
In addition, the Government continues to design and implement other mechanisms of business financing. For instance, a state programme of preferential lending for defence industry producers, introduced at the end of 2024, aims not only to improve business financing but also to strengthen the country’s defence capability.
The procedure for providing state guarantees on a portfolio basis is approved by the Resolution of the Cabinet of Ministers of Ukraine dated July 14, 2021 No. 723 "Some issues of providing state guarantees on a portfolio basis". The purpose of providing guarantees on a portfolio basis is to support micro, small and medium-sized businesses in Ukraine by simplifying access to bank financing for enterprises. State guarantees on a portfolio basis are provided to banks participating in the programme that meet the requirements of Resolution 723, according to their applications, provided that there is a free balance of the state guarantee limit in the state budget for the relevant year. Due to state guarantees on a portfolio basis, participating banks have the opportunity to independently form a portfolio of loans, the obligations of which are partially secured by a state guarantee on a portfolio basis (up to 50-80% of the principal debt obligations for the loan portfolio and up to 70-80% for each a separate loan). The presence of such a state guarantee enables participating banks to relax the requirements for other security for borrowers to receive loans. JSC "Ukreximbank" is designated by the Ministry of Finance as an agent under this programme.
Another programme, which is playing an important role in support of SMEs is the state programme Affordable Loans 5–7–9%, which was launched in February 2020. This programme is implemented by the Government of Ukraine through the Business Development Fund (which is under the mandate of the Ministry of Finance). During the first years of the full-fledged war, this programme had been the primary driver of the provision of credit financing to businesses. Today role of the programme is decreasing, as loans on business terms are reviving. Business Development Fund also provides its own credit guarantees distinct from guarantees on a portfolio basis.
As credit risk remains key for banks, the NBU has launched a resilience assessment of the banks and banking sector to determine the actual quality of the loan portfolio and to assess the potential capital needs. This year (2025), 21 largest banks will undergo the assessment. The banks with identified needs for a capital increase will draw up action plans for capital recovery.
Source: See Table 2.
References
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